Arizona Laws 20-1131. Exemption of life insurance proceeds and cash values from creditors
A. If a policy of life insurance is effected by any person on the person’s own life or on another life in favor of another person having an insurable interest in the policy, or made payable by assignment, change of beneficiary or other means to a third person, the lawful beneficiary or such third person, other than the person effecting the insurance or the person’s legal representatives, is entitled to its proceeds against the creditors and representatives of the person effecting the insurance.
Terms Used In Arizona Laws 20-1131
- Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Dependent: A person dependent for support upon another.
- Fraud: Intentional deception resulting in injury to another.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Person: includes a corporation, company, partnership, firm, association or society, as well as a natural person. See Arizona Laws 1-215
- Statute: A law passed by a legislature.
- Statute of limitations: A law that sets the time within which parties must take action to enforce their rights.
B. Subject to the statute of limitations, the amount of any premiums for insurance paid in fraud of creditors, with interest, shall inure to their benefit from the proceeds of the policy, but the insurer issuing the policy shall be discharged of all liability on the policy by payment of the proceeds in accordance with its terms, unless before payment the insurer received written notice by or in behalf of some creditor, with specification of the amount claimed, claiming to recover for certain premiums paid in fraud of creditors.
C. For the purposes of subsection A, a policy shall also be deemed to be payable to a person other than the insured if and to the extent that a facility-of-payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by the clause.
D. If, for a continuous, unexpired period of two years, a policy of life insurance has named as beneficiary the insured’s surviving spouse, child, parent, brother, sister or any other dependent family member, then, in event of bankruptcy or in any proceeding before any court in this state, the cash surrender value of the insurance, in the proportion that the policy names any such beneficiary, shall be exempt from claims and demands of all creditors, other than a creditor to whom the policy has been pledged or assigned, and except that, subject to the statute of limitations, the amount of any premiums which are recoverable or avoidable by a creditor pursuant to Title 44, Chapter 8, Article 1, with interest, shall inure to their benefit from the cash surrender value. For the purposes of this subsection, "dependent" means a family member who is dependent on the insured for not less than half support.